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Case Code: CLOM020
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| Case Length: 6 pages |
| Period: 2018 |
| Pub Date: 2019 |
| Teaching Note: Available |
| Subject : Operations |
| Price:Rs.200 |
| Organization :Adidas AG |
| Industry :Footwear and Apparel |
| Countries : United States |
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Supply Chain Issues at Adidas |
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| In 2018, despite knowing about the growing demand requirements for its mid-range apparel products in the North American market, the management of Adidas failed to source the required products from its suppliers spread across the Asian region on time. Adidas outsourced its manufacturing requirements across the globe to different partners. The present case provides an insight into the concept of responsive supply chains, their needs and their features. It also illustrates how Adidas’ production processes were unable to meet demand and the initiatives taken by the company to ensure products reached the customers on time. |
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Issues: |
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- 1) What are responsive supply chains?
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- 2) How can a responsive supply chain be developed?
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| Introduction |
After seeing a double-digit growth in sales during the fiscal year 2018 in North American markets, the world’s second largest sporting goods manufacturer, Adidas Group Company (Adidas), found itself facing a huge challenge in meeting the growing demand for mid-ranged apparel in these markets, due to a supply chain bottleneck. In its annual report, Adidas announced that it would miss the 2019 growth targets due to problems related to its supply chain, According to Chief Executive Officer Kasper Rørsted (Kasper), the capacity problem in the manufacturing plants was expected to create a loss of around US$225 million to US$450 million . “We have an excess demand that we can’t cover due to inefficient capacity at our manufacturing plants. It’s predominantly related to apparel and it’s predominantly related to North America in the first two quarters,” said Kasper...
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THE SUPPLIER RELATIONSHIPS |
Adidas outsourced 100% of its manufacturing operations to various outsourcing partners spread across the globe. The majority of its outsourcing partners were from Asia. Around 71% of the manufacturing requirements of the company were met by suppliers from the Asian region. By the end of 2018, the top five Asian countries where the suppliers were located were China, Vietnam, Korea, Indonesia, and India ...
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| THE US MARKET |
North America was the biggest market for sporting goods, and Adidas, which did not have much of presence in the market, looked at it as the single biggest growth opportunity for the brand. The company made USA its strategic priority and increased investments in the country. It also introduced mid-range apparel in the market, which became highly popular. According to Kasper, “We’ve doubled our business in the U.S. in the last three years, and the volume expanse we’ve had we simply can’t supply.... It’s a demand problem – we can’t really deliver on the demand of the market.” ...
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| THE SOLUTION |
After failing to fulfil the demand requirements for the first quarter of the fiscal year 2019,the Adidas management planned to utilize air freight to source and distribute mid-range apparel in the US during the rest of the year. The management also planned to secure extra supply chain capacity from the suppliers so as to meet the demand for the fiscal year 2019, and upto the second quarter of the next fiscal year 2020...
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Keywords |
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Adidas supply chain, supply constraints, mid-range apparel, manufacturing outsource, global suppliers, responsive supply chains
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** More comprehensive case studies are priced at Rs.200 to Rs.700 (US $5 to US
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